A research report by Citigroup’s Aditya Narain and Tirthankar Patnaik titled “Owning India Inc.: More Want Less" shows that, despite the sea change in the environment, there has been very little change in the investing behaviour of domestic mutual funds (MFs).

For example, with the Nifty as the benchmark, MFs were overweight in industrials by 1,683 basis points in December (which means industrials have a greater weight of 1,683 basis points in their portfolio, relative to their weight in the Nifty). At the end of September, they were still overweight in industrials by 1,474 basis points. And that’s in spite of all the talk of slowing investment, lower order growth and the difficulty in funding orders. MFs were overweight materials by 101 basis points in December and were overweight 189 basis points in the sector at end-September, despite crashing commodity prices. MFs were underweight a whopping 1,558 basis points in energy at the end of December and this improved to an underweight of 1,485 basis points at the end of the September quarter. And that’s in spite of plunging oil prices.

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In the September quarter, the most notable trend was the shift of MFs from a marginal underweight in financials to an overweight of 204 basis points. MFs increased their overweight position in the defensive consumer staples sector to 661 basis points, compared with 573 basis points at the end of June. They cut down their preference for industrials, but this remains their biggest overweight sector. The underweight for the IT sector has been reduced.

Insurance companies, too, haven’t made much of a change in the sector composition of their portfolios.Consumer staples were their biggest overweight at 793 basis points in December and that has gone up to 877 basis points by end-September (relative to weights on the Nifty). Insurers are also overweight in consumer durables, at 624 basis points at the end of the last quarter. In the September quarter, industrials shifted from a marginal overweight to a slight underweight, utilities became underweight, while the underweight in the IT sector has been reduced.

In contrast, FIIs have been more active in changing the composition of their portfolios. For instance, they were marginally underweight in financials in December and were overweight the sector by 413 basis points at end-September (compared with weights on the MSCI India index). They have increased their overweight position in telecom services from 245 basis points in December to 493 basis points. Their overweight position in materials has come down.

The other trend seen from the report is that while FIIs are getting cautious and re-jigging their portfolio weights closer to the benchmark, mutual funds have been trending away from the benchmark. Insurance companies, too, have concentrated positions.

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Graphics by Ahmed Raza Khan / Mint